Taxpayer financed signing bonuses…

January 8, 2009

While there’s been no shortgage of stories that question exactly what banks that receive money under the Treasury’s TARP program plan to do with that money, tracking down the details are a lot more difficult. In part, that’s because the Treasury department’s own website is an embarrassment that makes anyone trying to practice oversight, like my friends at bailoutsleuth.com, an exercise in extreme frustration. As the WSJ noted on Tuesday, Treasury’s most recent progress report on Tuesday didn’t even provide a running total on how much money has been handed out so far — a not-so-minor detail.

Given this, it’s easy to see how potentially embarrassing details at individual banks receiving TARP money can easily slip through the cracks, like this 8K filed by Hampton Roads Bankshares (HMPR) late yesterday. In the filing, the company notes that two executives of Gateway Financial (old ticker: GBTS), which Hampton announced it was acquiring for around $101 million on Sept. 24, received hefty bonuses for entering into new employment agreements with Hampton. Former Gateway Chairman and CEO D. Ben Berry got a $500K “for entering into the covenant” (hmmm….almost sounds like a religious order) and David Twiddy got $425K for entering into his covenant.

On Dec. 31, Hampton Roads announced that it had received $80.3 million under the TARP program. In the release, Hampton Roads Chairman and CEO Jack Gibson said, “The investment by the U. S. Treasury will ensure that we can fully meet the competitive challenges presented by the current economy and maintain leadership in all of our banking markets for the benefit of our shareholders, customers and employees.”

Keep in mind that the announcement of TARP money came on the very same day that Mssrs. Berry and Twiddy were signing the papers that would allow them to collect $925K simply for entering into new employment agreements. The two agreements also provide for other perks including something called “perpetual family medical insurance” — lifetime health, dental and life insurance for Berry and his spouse. Another curious detail about this whole thing is that a quick skim of the S-4 that Hampton Roads filed on Nov. 14 doesn’t provide details on how much the two Gateway executives received as a result of the merger.

Now, this is just one example at a relatively small bank. What would it take to go through the list of the nearly 300 banks that have received TARP funds, look at various employment contracts in the SEC filings and figure out how much of the TARP money is going toward signing bonuses, country club memberships (that’s in Berry’s contract too) and lifetime health insurance? Given the amount of money involved, it certainly seems like a worthwhile project to pursue.